The question of when damage was capable of being discovered will now become the new battleground in property damage claims where there is a possible Statute of Limitations defence.
The Irish Supreme Court unanimously held recently that the key date for the Statute of Limitations when bringing a claim in tort/negligence for property damage is the date of the manifestation of damage from defective work, rather than the date of the defective work itself.
The Court of Appeal previously overturned the decision of the High Court in Brandley and WJB Developments Limited–v-Hubert Dean T/A Hubert Dean & Associates and John Lohan T/A John Lohan Ground Works and Tractors (High Court 2010/10994P and Appeal 2015/245).
The case concerned two houses in Co Galway which were part of a small terrace of three houses that were constructed on one common raft foundation. The first defendant was the project engineer who issued certificates of compliance. The second defendant was the grounds work contractor whose work included the foundations of the houses.
As a general rule, proceedings for negligence must be commenced within six years from the date on which the cause of action accrued. In this case, the proceedings were commenced over six years after both the laying of the foundations and the engineer's certification.
However, the proceedings were commenced less than six years from the date upon which the damage became apparent to the plaintiffs.
Below is a summary of the key dates:
- March 2004: The foundations of the houses were completed;
- September 2004: The engineer issued his Certificates of Compliance;
- February 2005: The houses were completed;
- December 2005: The plaintiffs noticed cracks in the houses;
- November 2010: The plaintiffs issued proceedings against the engineer and the contractor.
The parties agreed that the test for when the cause of action accrued was not one based on discoverability but rather the question to be answered was "when did the plaintiffs suffer damage by reason of the negligence of the defendants".
The nub of the plaintiffs' case was that although the negligent installation of the foundations and the negligent certification were outside the six year time limit, the damage that came about as a result was within that period.
Justice Kearns held on April 16, 2015, that the plaintiffs' claim was statute barred. The learned judge cited the judgment in Murphy-v-McInerney Construction Limited (2008) IEHC 323 which "firmly exclude a discoverability test as being the relevant starting date". The High Court dismissed the plaintiffs' claim.
Court of Appeal
The three judge Court of Appeal overturned the High Court decision on February 2, 2016, and held that the plaintiffs' proceedings were issued in time and were not statute barred.
The defendants appealed this decision to the Supreme Court who gave Judgment on 15 November 2017. The Supreme Court appeal was largely based on the proposition that the Court of Appeal had, in substance and contrary to Irish case law, applied a discoverability test.
A unanimous decision of the five-judge Supreme Court given by Mr Justice McKechnie (Clarke CJ, MacMenamin, Dunne and O'Malley JJ concurring) ultimately upheld the Court of Appeal's decision that the plaintiffs' claim was not out of time.
Several distinct possible starting points
The court noted that there appeared to be several distinct possible starting points from which the clock might run for limitation purposes, starting with the date of the wrongful act (being the earliest and thus the most defendant friendly), and finishing with the date of actual discovery of the damage (being the latest and thus the most plaintiff friendly).
Justice McKechnie stated: "...I accept that there is a definite distinction between a "defect" and the subsequent damage which it causes. Time runs from the manifestation of damage, rather than of the underlying defect. Thus it is not the latent defect which needs to be capable of discovery: it is subsequent damage caused by that latent defect...".
The Supreme Court distinguished the word "manifest" from that of a "discoverability test" and was keen to emphasise that a "discoverability test" should not apply.
"...it is not so easy to pin down precisely what is meant by "manifest", and especially how one might differentiate it from the "discoverability test" [as appears in case law]. From a reading of the case law, I understand "manifest" to mean the date on which damage is capable of being discovered by a plaintiff [my emphasis]..."
Justice McKechnie found that if no loss or damage arises out of a defect, then no cause of action exists. In this instance, he found that the using of incorrect materials gave rise only to a latent defect, and more – i.e. physical damage – was required before a cause of action accrued and the Statute of Limitations clock began to run.
Thus, it was not until the latent defect in the foundations caused actual physical damage to the houses by way of cracking in December 2005 that the damage 'manifested' itself and plaintiffs' cause of action accrued.
This decision provides important guidance from the highest court in the land on the date on which the Statute of Limitations clock begins to tick for property damage cases. It re-emphasises the principle that a cause of action in non-personal injury claims accrues when the damage becomes manifest.
The court pointed out that damage is "manifest" when it is capable of being discovered (irrespective of whether it has or has not been discovered or ought to have been discovered). It was careful to distinguish this principle from the "discoverability test" in personal injury actions and expressly reaffirmed the position that a "discoverability test" does not apply in non-personal injury claims in tort and negligence.
In a construction context, there will often be a distinction or indeed a time gap between when defective work takes place and when actual damage arising out of that defective work becomes manifest.
In reality, the question of when damage was capable of being discovered will now become the new battleground in property damage claims where there is a possible Statute of Limitations defence. It is a question that will often need to be answered with the assistance of expert evidence.
Generally speaking, this decision will not be welcomed by those employed in the construction industry and/or by their professional indemnity insurers as it opens the door for claims being successfully brought against construction professionals outside of the traditional statutory period of six years after defective work was carried out.
Originally published by Engineers Journal.
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